The Gump Returns

G'day all,


As you may have noticed, I have been quiet for a while. I just felt that after ten years of continuous posting on Cellestis that I deserved some "Long Term Service Leave". A few weeks on a driving holiday through France and Italy has been most enjoyable - I may even post something about my experiences at some point. 


Whilst I haven't been posting anything during my break, I have (of course) been keeping up with Cellestis developments and forum postings with my whizz bang new Android smartphone.


There seems to be a lot of angst being expressed in the forums at the moment. I have some thoughts on that that I would like to share. However, just before I do, let me qualify the context, meaning and purpose of my comments. Many of my comments are totally contrary to those being made by other posters. The fact that I disagree with them should not be taken as to mean that I have any disrespect for those posters, their comments or their right to express an opinion. In fact many of the posters that I disagree with have earned my respect over long periods of time. We all have the right to have our own opinions. The fact that sometimes those opinions differ means nothing more than that we have developed different opinions. There are numerous reasons why our opinions can (and should) vary. 


In short, my following comments should not be interpreted as being an attack of any specific poster(s). They are simply my thoughts that have developed in response to the general angst that seems to have permeated much of the Cellestis investor community.


It seems that the main criticism being made against the Company (or more specifically, the Directors) is that they are not providing enough information, often enough. There are a number of aspects to this criticism that I will address.


We are all grown ups. We need to make our own decisions based upon our own interpretation of what is going on around us. It seems that some people want Tony Radford to visit their home each night, tuck them up into bed and whisper into their ear "things are going to be just fine". I'm pretty sure that is not going to happen (frankly the mental picture is just a bit spooky). Seriously, it has been our decision to invest in Cellestis. We did it because we want to make money by doing so. It is our responsibility and we cannot rely upon anybody else to make us feel better about our own decisions. Putting aside illegal, immoral or criminal activity (of which there is not even a scent) then the only person that we can blame if our investments do not meet our expectations is ourselves.


I have to wonder (but not for too long) what it is that has brought on this spurt of negativity from some investors. It's pretty obvious that it has been brought on by the current share price. It really seems that people sometimes lose sight of the business and are driven only by the share price. If the current share price was $5, with nothing different about the business, would people still be complaining? People are suggesting that the Directors should be out there promoting the stock to other investors. Why is that? The Share Price of Cellestis is essentially made up of two components, an intrinsic value (based on current earnings) plus a speculative premium. Now, you can calculate the intrinsic value in any way that you wish but let's say it's currently about one dollar. That means that if you buy the share today then you are paying about $1.30 speculative premium. That is, you have decided that the future prospects of the Company are good enough that you are willing to pay that much to buy those future prospects (absolutely nothing wrong with that). So, therefore people are saying that they want the Directors to increase that speculative premium by making some predictions about the future (that, incidentally, they can be accountable for). Why do you want the speculative premium to increase? So that somebody else will be willing to buy your speculative premium at a higher value than current. In fact, what you are asking is for the Directors to push the speculative premium above the value that you believe it is worth, so that you can sell your shares on to somebody else and you can bank a nice profit. 


That just doesn't make sense to me. If the Directors came out next week and made categorical statements about next year's profits then it is up to you, and only you, to decide whether you want to hold, buy or sell the shares. To buy or sell you will need to meet the market. If you are planning to sell then you are hoping that the market will have greater faith in the future of the Company than you do. If you don't have faith in the Company then why are you holding the shares? 


What if the Directors make a prediction about next year's profits that turns out to be wrong? Then you would be pissed off!


Personally, what I want for the future is for the Company to continue progressing so that the speculative premium that I have paid becomes converted to intrinsic value. That will mean that I will be receiving bigger dividends and should the situation ever arise that I decide to sell some of my Cellestis shares I will receive what I consider a fair price for them. 


I don't think that there is any validity in criticising the Directors for not promoting the stock - that is not their job. Their job is to run the business in our best interests. If people have any concerns with the way that the Directors/Management are running the business then that is what they should be discussing.


Another way of looking at it. Aren't you saying something like "CST is worth more than the current Share Price. If only the Directors would shout it from the rooftops then everybody would know this". Well, if that is what you believe then surely you should buy as many CST shares as you can afford? The definition of a great buy is when the market undervalues a share. Eventually, the market will get it right (maybe just for a moment).


If you think it is "fair" that the Directors should let people know when the market has undervalued a share then shouldn't they also do this when the market overvalues a share. How would shareholders react if the Directors of a Company came out and said "We think the shares are not worth as much as the market is saying". 


Again, it is we the market participants, who determine the share price. It is up to the Directors to run the business in the best way possible and to ensure that everybody has access to the same information about the company.


Okay, let's look at it from a slightly different perspective. I note that several people have expressed the desire that the Company release sales figures every 3 months. I have no real objection to that but I don't actually see it as being of any benefit to us. There may be some good reasons why they are not doing this - it has been suggested that the "lumpy" characteristic of CST sales patterns may create incorrect impressions. Whether that, or any other reason, is true is immaterial. Look at it in simple terms. If the Company released astoundingly good figures for a quarter, how would that benefit you? You would assume that the share price would go up. What will you do? Sell? Why would you sell? After all, surely your long term faith is being rewarded. A similar scenario can be painted for the reverse.


It often seems to me that people are looking for "the bigger fool" to offload an investment that they decided to make and are no longer happy with. Not only that, they want the Directors to encourage this "bigger fool" to buy their shares. That's just plain silly. The Company does not benefit from that action, the Directors do not benefit, the existing shareholders do not benefit and the purchaser does not benefit. The only person that benefits is you - the seller. The share market is not there to unconditionally make you rich - it is there to allow people to make investments in Companies based upon their own opinions, regardless as to how they came to them.


In the end, even if they wanted to, I doubt that the Directors can make any firm prediction about next year's profits. I am quite content with the information that the Company currently provides in it's annual and half year reports and investor briefings. Augmented with my own research and that performed by others (a special thanks to Roger) this is enough for me to make my own well judged decision about my investment in Cellestis. Not that it is relevant to you but I have actually purchased more CST shares recently.


Note that all my comments are made from the perspective of an investor. Traders are big boys and girls - they can look after themselves.